Perm Territory

LUKOIL has been operating in Perm Territory since 1991. Integration with the Company gave Perm organizations a chance for a new birth, opened prospects for consistent, vibrant and innovative development. It was back then that the Company began to cooperate with the regional authorities, and this cooperation serves as a good foundation for fruitful production and social activities of the LUKOIL entities.

Today, Perm Territory is the only entity in Volga Federal District with full representation of the entire LUKOIL production hierarchy. Upstream and downstream operations represent a comprehensive oil and gas complex in the region.

LUKOIL makes a significant contribution to the integrity of operations of the oil complex of the Kama River area. A total of about 18,000 people are employed by LUKOIL in Perm. The entire oil industry provides sustainable employment to another 20 thousand residents of the Kama River area. They work for contractor and service organizations of oilers.

In 2015, the Company's refinery in Perm Territory used vacuum fuel oil free technology for the first time in the Russian refining industry. Currently, oil conversion rate has reached 98%.

In 2015, LLC LUKOIL-Permnefteorgsintez commissioned a thermal auxiliary power plant that ensures reliable and uninterrupted supply of thermal and electric power to the plant and increases the efficiency of associated petroleum gas utilization in Perm Territory by burning stripped dry gas.

The Company makes significant investments into the development of the marketing infrastructure in the Kama River area. According to the development strategy, the number of filling stations will grow from 323 in 2012 to 340 in 2017. As of today, there are 322 LLC LUKOIL-Permnefteprodukt filling stations and 7 operating bulk plants. At the city-forming entity of Nizhny Tagil — the Nizhny Tagil Metallurgical Plant – 9 fuel modules were commissioned to supply gasoline and diesel fuel to the entity.

LUKOIL consistently develops both production and the social components in Perm Territory based on its extensive experience and the latest scientific achievements.

KEY EVENTS

2012

As a result of using the latest technology in the drilling of a 2,340 m well on the artificial island on the Kama river, the Sukharev field was discovered. It is the third largest field in terms of reserves. It was discovered in Russia in 2012. Due to the specificity of the field’s location and the unique local eco-system, the Company employs state-of-the-art technologies and works on exclusive projects to develop the field.

2012

A new gas compressor station was built as part of the project entitled “Utilization of Associated Petroleum Gas from the Dorokhov Group of Fields”. The station is called Kurbaty, its design capacity is 100 million cu. m of associated petroleum gas per year.

2013

Perm oilers introduced a two-tier technology to utilize associated petroleum gas for the first time. The innovation was successfully introduced due to the imtroduction of Capstone micro-turbines at the gas turbine power plant (GTPP). The GTPP is located at OGPS No. 8 and has 4 micro-turbines. The aggregate capacity of the power plant is almost 0.8 MW. This will make it possible to process more than 2 million cubic meters of gas and generate 700 kW of electric power per year to cover the production needs of the oil and gas production shop (OGPS).

2014

At the Ilyichevskoye field, four GTPP units with a total capacity 16 MW were built and launched. At the final stage of construction the Ilyichevskaya GTPP will be connected to the new Yurman transformer substation 35/10kIn 2х16 MW of the OJSC MRSK Urala - Permenergo branch. Project completion is planned for 2016. It will help generate up to 134.4 million kWh of own electricity and sell the surplus to the system of OJSC MRSK Urala - Permenergo, as well as to utilize over 40 million cu. m of associated petroleum gas at the Ilyichevskoye field alone.

2014

Production started at the unique Rostovitskoye field (Solikamsk District). This field is unique because oil is extracted from under the deposits of potassium and magnesium salts. The total depth of the first wildcat is 4,570 meters, which is a record-breaking depth for Perm Territory. Thanks to the comprehensive approach and innovative technologies used by Perm oilers, it took them less than a year to start developing it after it had been discovered.

2014

The first Russian Testing and Research Center for Fluid Catalytic Cracking (FCC) Catalysts built as part of the trilateral cooperation between the Perm National Research Polytechnic University, the Government of Perm Territory and PJSC LUKOIL Charity Fund, was opened in Perm. The new Center will be addressing a broad range of economic, scientific and educational tasks. The research will focus on testing fresh and equilibrium cat-cracking catalysts, study of their physical and chemical properties, selection of the best catalysts for the refineries in Russia and the CIS countries.

October 2014

LLC LUKOIL-Permnefteorgsintez merged with a gas processing company (formerly a separate company LUKOIL-Permneftegazpererabotka). In 2015, the Company completed a large-scale investment program to increase gas processing capacity. Around two dozen facilities were built or upgraded at the gas processing site. This includes an associated petroleum and natural gas treatment unit to remove sulfur compounds and utilize acid gases to obtain liquid sulfur using the Klaus method, the second line of the low temperature condensation and rectification unit with a gas fractionation section, as well as a booster station to deliver stripped dry gas as fuel to the auxiliary CHP plant for the Company’s own needs and to PJSC Gazprom’s gas transportation system. As a result, the level of utilization of associated petroleum gas from Perm Territory fields will exceed 95%.

2015

The third stage of modernization was completed at LLC LUKOIL-Permnefteorgsintez with a focus on construction of the petroleum residue recycling unit. It includes new delayed coking units and facilities for hydrotreatment of diesel fractions with a hydrogen production section. As these facilities were commissioned, the Company switched to vacuum fuel oil free production at 98% conversion rate, a record for Russia. Euro-5 diesel fuel and gasoline production went up significantly, as well as the production of vacuum gasoil and popular grades of coke.

2015

Construction of the gas pipeline BPS Zhilinskoye — Chashkino metering station with a length of 29.809 km was completed. This work reflects an increased production of associated petroleum gas at the Zhilinskoye, Rostovitskoye, and Belskoye fields and the lack of infrastructure for this project. As a result, the associated petroleum gas from the Zhilinskoye field is supplied to PJSC Uralkaliy BKPRU-4.

2016

As part of the Smart Field project implementation, a Center for Integrated Operations was launched at the Polazna central engineering and technical service. The Center for Integrated Operations implements new approaches to managing operations: comprehensive planning, close cooperation with R&D institutions, joint analysis of the process and collective decision-making.

ENVIRONMENT PROJECTS

From 2006 and to the present day, the process furnace upgrade and replacement program has been underway at the refinery to reduce specific fuel consumption per unit of output. The implementation of the program has helped the Company reduce greenhouse emissions by 218 ths. tn per year (or by 8%).

Since 2007, charity campaigns "The City of Oilers is City of Flowers" and "Children and LUKOIL for the Environment" have been implemented in Perm Territory. Every year, as part of the campaign, flowers and bushes are planted, children's playgrounds, parks, gardens, recreation areas, river banks are cleaned and beautified. In 2015 alone, as part of the campaigns in the Kama River area, more than 450 thousand flowers were grown and 775 recreation areas beautified.

Since 2007, an open contest of children's environmental projects entitled "Perm as Workshop of the Future" has been held in the Industrial District of the city of Perm.

School and family groups, creative teams, and volunteers from territorial public councils take part in the contest. The main objective of the event is to engage children and teenagers in solving the problems around them and help them take an active stand in life. Over the nine years of its existence, 600 contest applications have been submitted, while the best projects won grants. The contest activists clean polluted water bodies, go on scientific expeditions to the specially protected zones of the Kama River area, beautify school and kindergarten premises, hold environmental competitions, festivals of environmental fashion and guided tours around their district. LLC LUKOIL-Permnefteorgsintez was awarded twice for successful implementation of the "Perm as Workshop of the Future" project winning the EcoWorld National Environmental Award. According to experts, the contest has proven its right to be called fruitful ground for the development of environmental initiatives.

Since 2008, the refinery has been implementing the project entitled "Construction of Oil-Contaminated Waste Disposal Unit," including the removal of historical waste accumulated before 1991, and reclamation of former disposal sites.

In 2012, LUKOIL entities in Perm Territory joined the Green Office project organized by the Russian Greenpeace office. It is designed to introduce environment protection measures to office buildings.

Since 2013, juvenile fish have been released into the rivers of the region. In 2013, the water bodies of the Kama River area received 265 thousand juvenile fish of such species as spike, sander, sterlet, in 2014 the number came to 686 thousand fish. In 2015, as part of the measures aimed at artificial reproduction of aquatic biological resources, the water bodies of Perm Territory (Kamskoye and Votkinskoye reservoirs, rivers Bui, Yaiva, Chusovaya) received over 358 thousand juvenile sterlet, over 314 thousand pikes, 165 thousand sanders.

Since 2013, the Company has been involved in a joint project entitled "Long Live, Spring Brooks" with the districts of the Kama River to build and beautify wellsprings in Perm Territory. As part of the projects, 50 spring wells were built, the territory around the Bugrovskoye, Zmeyevskoye, Pervomaiskoye, Krutovskoye, Polaznenskoye and Kamennolozhskoye oil fields was improved in 2014—2016.

The Company implemented project solutions to build 9 flare systems ensuring smokeless associated petroleum gas flaring. The reduction of pollutant emissions into the air as a result of constructing smokeless flare systems amounted to 30 ths. tn per year.

Reconstruction of the Yarino — Kamenny Log associated petroleum gas pipeline and construction of facilities at MCS Unva are part of the project to increase supply of associated petroleum gas. When the project is finished in 2019, the total volume of associated petroleum gas supplied for treatment will amount to 428 million cu. m per year.

As a result of construction of the facilities at MCS Pavlovka and MCS Kuyeda, the total volume of associated petroleum gas supplied for treatment will reach 216 million cu. m per year. The effect from commissioning of the facility will be achieved by 2019.

In 2014, a garden of oilers was laid out in Osa, and a recreational part of the Preduralye wildlife reserve near the Yermak Stone in Kungursky District was developed. In 2015, a 2 hectare public park in Oktyabrsky District was beautified.

CHARITY AND SOCIAL PROJECTS

Since 2006, LUKOIL and Perm Territory Government have been taking measures as part of the Cooperation Agreement between PJSC LUKOIL and Perm Territory. Over this period, significant investments have been made into social facilities and projects of the Kama river area. More than half of all funds have been used for construction and renovation of 128 schools and kindergartens, 167 infrastructure facilities, 53 hospitals and polyclinics, 56 rural health posts, 43 sports facilities, 102 culture centers, tens of churches and mosques across the region.

At the end of 2013, V.Yu. Alekperov, President of PJSC LUKOIL, and V.F. Basargin, Governor of Perm Territory, opened a new kindergarten for 260 children in Perm. In 2014 the Pearl swimming pool and the St. Spyridon Church were built in the town of Chernushka. In 2015 a district hospital was opened in the village of Uinskoye. The facilities were built as part of the Cooperation Agreement between Perm Territory and PJSC LUKOIL.

In 2013, a new joint project with Perm Territory Government was launched, i.e. construction of standard modular village cultural centers and health posts. In 2013, 14 rural health posts and 3 cultural centers for 100 people were erected. 21 health posts and 4 centers for 100 seats were constructed in 2014, 21 health posts and 5 cultural centers for 200 seats were brought to life in 2015. Plans for 2016 include the construction of 3 rural cultural centers for 100 seats.

LUKOIL actively supported the Governor's initiative to reduce queues to child care centers. In 2015, the Company financed the construction, upgrade and total renovation of 11 kindergartens in Perm Territory.

In 2014, as part of the Cooperation Agreement between PJSC LUKOIL and Perm Territory the Polygon practical training center was built on the premises of the Chernushinsky Polytechnic Vocational School. This is an exact copy of an oilfield with four wells, an automated metering unit, a transformer substation and other equipment necessary for practical classes of students specializing in oil production.

Every year since 2002, LUKOIL has been holding the Social and Cultural Projects Competition in Perm Territory. Perm Territory is the birthplace of this competition. Over 15 years, more than 2 thousand projects have been implemented. In 2016, the Kama River area will get 21 new children's playgrounds and sports grounds as part of the competition, at least 3 parks will be beautified, two museum exhibition areas will be laid out. In the year of LUKOIL's 25th anniversary, 25 interregional and Chernushinsky, Osinsky and Kungursky municipal districts of Perm Territory. Over 200 volunteer teams will take part in the implementation of projects.

Targeted assistance is provided to medical institutions, higher and secondary vocational educational institutions, sports organizations, theatres, and churches. As part of the implementation of the program in 2015, the following organizations received support through the LUKOIL Charity Fund: Perm Orthodox Pubic School, Belogorye St. Nicholas Monastery, Perm Academic State Opera and Ballet Theatre, Oil and Gas Institute of the Perm State Technical University, orphanage in Osa, etc.

For a number years, LUKOIL has been supporting 4 regional and international exhibitions in the Kama River area, including the Fair for Folk Crafts and Applied and Decorative Art, Interregional Forum of Islamic Culture, "Orthodox Rus — 2015", "Oil. Gas. Chemistry — 2015." Every year these events attract hundreds and thousands of participants and guests from the Kama River area and other regions. The Company organizes exhibitions inviting participants from other regions of its presence.